Wednesday, 28 October 2015

MTN is Nigeria's biggest and most profitable market, but Nigeria has imposed a record $5.2bn fine on a South African mobile phone
company for failing to register users, raising concerns that regulations
are being tightened to compensate for a budget shortfall. But seeing the fine go beyond $1,000 USD.

The unprecedented fine has already caused a 16% drop in the share
price of MTN, Africa’s largest mobile phone company, and threatens the
firm’s future in Nigeria, its biggest and most profitable market.

Nigerian regulators accused MTN of failing to deactivate unregistered
sim cards in a timely manner, and argue that the fine is designed “to
ensure that the wilful non-compliance ceases”.

Unregistered sim cards are seen as a major security threat by the
Nigerian government, which is concerned that anonymous numbers
facilitate terrorism and crime. Last
year Nigeria’s parliament recommended that Shell pay a $3.96bn fine for a
major oil spill at its offshore Bonga oilfield that caused long-lasting environmental damage. The fine has come as a shock to MTN’s shareholders, who know that
Nigeria is the company’s largest and most profitable market.
Significantly, the company’s Nigerian operating licence is up for
renewal next year and there are fears that run-ins with the regulator
could threaten this renewal.

MTN’s share price on the Johannesburg Stock Exchange has collapsed
since the fine was imposed, with the company losing 16% of its value in
just two days of trading. The company is also being investigated
by the stock exchange over accusations that it failed to officially
alert shareholders to the fine for more than seven hours after it first
became public.

Beyond a public statement confirming the fine, MTN has not commented
beyond saying that it hopes to reach a lower settlement. Failing that,
analysts expect lengthy court proceedings or a dramatic exit from
Nigeria.. Stanbic IBTC,
the Nigerian subsidiary of South Africa’s Standard Bank, was ordered to
withdraw and restate its 2013 and 2014 financial statements amid
suspicion of “accounting irregularities and poor disclosures”. Stanbic
denies any wrongdoing, but four directors – including the current
chairman and CEO – have been suspended until the matter is resolve. The problems encountered by two of South Africa’s most prominent
companies in Nigeria has caused concern. “Both MTN and Standard Bank’s
Nigerian operations were hammered on the same day, which may look like
an SA-focussed clampdown."